Luxembourg's company law reform

Major reform and modernization of Luxembourg's company law

On 13 July 2016 the Luxembourg Parliament adopted a major company law reform, which is (i) modernizing the Luxembourg corporate law, (ii) granting legal certainty for certain practices that were previously subject to legal practices, (iii) introducing a new corporate entity, and (iv) introducing added flexibility in the mostly used form of companies. The two underlying principles to this reform are enhancement of the contractual freedom and the promotion of a business friendly environment. This reform adapts the legal framework to the economic realities and improves the consistency of Luxembourg corporate law and the competitiveness of the Grand Duchy of Luxembourg.

Existing companies have 24 months to comply with the mandatory provisions of the revised company law, after which the provisions become directly applicable.

The key points of the reform are:

The creation of a simplified company limited by shares (S.A.S. - société par actions simplifiée). The main characteristic of this legal entity is the contractual freedom granted to its shareholders, particularly regarding the governance of the company which could in many respects be freely determined by the articles of association.

The private limited liability company (S.à r.l. - société à responsabilité limitée), one of the most widely used corporate form in Luxembourg, is becoming even more attractive and flexible, particularly for joint ventures and private equity investments. The main changes relate to:

The introduction of authorized share capital, allowing the board of managers to issue shares within the limit of the authorization;

The issuance of beneficiary shares and redeemable shares;

The introduction of a day-to-day management function;

The simplification of majority thresholds for shareholders meetings; and

The increase of the maximum number of shareholders to 100.

The legal requirements for a public limited liability company (S.A. - société anonyme) are lowered and the introduction of new features makes it more attractive, notably for management participation plans and special purpose vehicles. The main changes relate to:

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DLA Piper is a global law firm with lawyers located in more than 40 countries throughout the Americas, Europe, the Middle East, Africa and Asia Pacific, positioning us to help clients with their legal needs around the world.